EU Wheat Jumps As Ukraine Bans Exports
For the week overall that places Nov 12 London wheat GBP4.60/tonne higher and Nov 12 Paris wheat up EUR4.00/tonne with London wheat punching above it's weight once again.
News that Ukraine is to ban wheat exports starting Nov 15th quickly saw the market jump mid-morning, even though it has been known for some time that the government there had agreed a 5 MMT cap on wheat sales this year.
They've already exported 6.6 MMT of grains since the 2012/13 marketing year began on Jul 1st, of which 3.35 MMT is wheat, 1.85 MMT corn and 1.35 MMT barley.
The corn harvest in Ukraine is ongoing, and that will be the focus of their grain exports for the remainder of the season. Bringing in just under 39 MMT so far, the grain harvest there is said to be 89% complete with yields averaging 2.94 MT/ha, 13% down from 3.39 MT/ha a year ago.
The Kazakhstan harvest is just about complete, producing 14.55 MMT of grain in bunker weight, with yields averaging only 0.97 MT/ha, down nearly 45% from last year's bumper harvest.
With Ukraine now officially out of the international wheat market it remains to be seen whether Russia will follow suit at the risk of upsetting their new pals in the World Trade Organisation. Whether they do or they don't is immaterial really, they can already effectively be ruled out as large scale competitors in the global wheat trade until the summer.
That leaves Europe well placed to step up their export attempts - Brussels issued just under 500 TMT of soft wheat export licences this week. Even so Argentine wheat is probably the most competitively priced wheat in the world at the moment, and their harvest will be kicking off soon.
The harvest in Australia is already underway, with the majority of private estimates around the 21 MMT mark, well below last season's record 29.5 MMT crop, but high carry-in from last year could still potentially see them export 17 MMT or so of wheat in 2012/13.
Yesterday's dismal UK wheat export figures for August suggest that we will be lucky to ship out more than half a million tonnes of wheat this season, only a fifth of 2011/12 sales. Wheat imports meanwhile are racing ahead
Chicago Rallies As Fund Buying Returns
18/10/12 -- Soycomplex: Nov 12 Soybeans closed at USD15.45 1/2, up 36 1/4 cents; Jan 13 Soybeans closed at USD15.46 1/4, up 38 cents; Dec 12 Soybean Meal closed at USD463.30, up USD8.60; Dec 12 Soybean Oil closed at 52.30, up 127 points. Fund buying was estimated at around 10,000 soybean contracts. Weekly soybean sales of 525,200 MT fell short of the anticipated 650-850 TMT, although China did take 268,400 MT including 120,000 MT switched from unknown. Exports to date this marketing year are 4.7 MMT after another strong week of shipments - 1.5 MMT which is the highest weekly total in twenty months. That takes total 2012/13 commitments so far to 24.5 MMT or over 71% of the full season target. The US remains pretty much the only soybean shop left open in the entire world. Safras e Mercado say only 1.32 MMT of Brazilian old crop beans remain available for export until next season’s harvest. They also say that 37.56 MMT of new crop beans have already been sold. What early new crop beans that are available in January are expected to be snapped up by the domestic crushers. Brazilian soybean plantings are seen as 9% complete versus 13% a year ago as some areas wait for rain. "Rains did return to south central Mato Grosso do Sul, Sao Paulo, southwestern Minas Gerais, Goais, and central and eastern Mato Grosso this past week, which further improved moisture there for soybean planting and early growth. However, notable dryness is maintaining slow planting and germination in eastern Parana, north central Mato Grosso do Sul, and central and northern Minas Gerais," say MDA CropCast.
Corn: Dec 12 Corn closed at USD7.60 3/4, up 15 1/4 cents; Mar 13 Corn closed at USD7.59 1/4, up 14 1/2 cents. Fund buying was estimated at around 10,000 contracts on the day. Weekly export sales came in at the low end of the 150-300 TMT expected at 166,700 MT. Once again that is well short of the 420 TMT/week to meet the latest USDA target for 2012/13. Existing corn commitments for export are 10.6 MMT so far this season, 34% of the USDA's targeted 31 MMT. This is substantially lower than in recent years. French analysts Strategie Grains cut their EU-27 grain production estimate by 1 MMT from last month to 269.5 MMT, mainly due to a corn crop more than 20% down on last year at 52.8 MMT. Argentina are said to be considering raising their 2012/13 corn export quota by 7 MMT to 15 MMT is plantings meet expectations. The Ministry there are forecasting a 2012/13 corn crop of 28 MMT. Corn plantings however have been hampered by excessive rains in many parts of the country, and are currently estimated to only be around 2/3rds complete of the target area of around 4 million hectares. "Rains should build back across much of the region this week which will maintain abundant moisture for corn early growth. Some wetness concerns will also persist across central areas," say MDA CropCast. They raised their estimate for 2012/13 world feedgrain production to 1022.3 MMT today, up 1.4 MMT from last week due mainly to acrage adjustments in U.S. corn.
Wheat: Dec 12 CBOT Wheat closed at USD8.68 1/2, up 12 1/4 cents; Dec 12 KCBT Wheat closed at USD9.04 3/4, up 10 3/4 cents; Dec 12 MGEX Wheat closed at USD9.44, up 4 1/2 cents. Weekly export sales of 410,000 MT were slightly ahead of expectations. South Korea bought 55 TMT of optional origin wheat from Toepfer for Jan shipment. The Russian grain union estimated 2012/13 grain exports at 15-16 MMT versus the Ag Minister's estimate of only 10-12 MMT. So far this season Russia has exported 8.7 MMT of grains. Winter grain plantings there currently stand at 15 million hectares out of a targeted area of 16.8 million. Ukraine says it has so far planted 7.4 million hectares of the planned 8.5 million ha of winter grains and that benign weather conditions will extend the planting period by a couple of weeks. US winter wheat is getting planted in far from ideal conditions. "Significant dryness continues to stress wheat across Nebraska, northeastern Colorado, and northwestern and south central Kansas. Much more rainfall is still needed in Washington and southeastern Idaho in the Pacific Northwest as well," said MDA CropCast. Elsewhere "showers favoured southeastern Queensland, eastern New South Wales, and eastern Victoria this past week, with drier weather noted elsewhere. The drier pattern is now beneficial for wheat, as drydown and harvesting build. Rains should remain quite limited across most areas this week, which will allow maturation and harvesting to continue to progress well," they add.
EU Grains Rise On Ideas Recent Declines Overdone
US grains posted a second day of good gains and Europe followed suit on ideas that recent declines have been overdone.
Strategie Grains estimated the EU-27 soft wheat crop down 0.7 MMT from last month at 123 MMT, a drop of 4.4% on last year's 128.7 MMT. They also cut EU-27 corn production by 0.9 MMT to 52.8 MMT, 20% down on last year.
In amongst all that was a downwards revision for UK wheat output to 13.46 MMT with yields at 6.75 MT/ha off 1.99 million ha. That puts them broadly in line with other recent forecasts from Defra and the NFU, leaving us with a wheat crop around 12% lower than last year.
The supply and demand picture however is not all roses. Customs data shows that UK wheat exports were appalling at just 26,804 MT in August, bringing the 2012/13 year-to-date total to 65 TMT - less than a quarter of the 282 TMT exported at this point a year ago.
Imports meanwhile are up 164% to 341 TMT vs 129 TMT in 2011/12.
The UK clearly has a very poor crop that nobody wants internationally, so what are we going to do with it all?
Ensus have announced that they will take wheat down to 60kg/hl bushel weight, at an unspecified discount, although "the policy would be kept under review as the firm discovered more about the extraction rates of lower bushel weight grain," according to the Farmer's Weekly.
Ukraine's Ag Ministry say that the country will plant 8.5 million hectares of winter grains this year (versus 8.4 million a year ago), of which 7.4 million is already in the ground. Winter wheat plantings are at 6.3 million hectares, which is 94% of the planned area. Crop conditions so far are far better than they were a year ago.
Benign weather also sees Russian winter plantings currently at 15 million hectares against a planned 16.8 million this year.
"Showers this past week further improved moisture across central and southwestern Ukraine, Belarus, and Central Region. However, dryness continues to stress wheat establishment across far eastern Ukraine, northern North Caucasus, and Volga Valley. Showers should improve conditions slightly in central Volga Valley this week, but drier weather is expected elsewhere across the winter wheat belt," say MDA CropCast.
Closer to home "rains this past week did improve moisture a bit across northwestern Spain, Italy, central Romania, and Former Yugoslavia, which will allow establishment there to improve. However, additional showers in northwestern France and UK maintained some wetness there," they add.
The Morning Vibe
18/10/12 -- The overnight electronic market is higher, building on last night's gains, with beans up 17-20 cents and corn & wheat 5-7 cents firmer.
Bargain hunting seems to be the theme all of a sudden. This afternoon's weekly export sales report from the USDA will be interesting. The trade is expecting soybean sales of 650,000-850,000 MT versus 523,700 MT last week. Last week's total may have been adversely affected by a Chinese holiday, so it wouldn't be a huge surprise to me to see a weekly total in excess of 1 MMT today.
China were after all buying beans quite happily at seventeen dollars plus, so today's levels should look like a bargain.
Corn sales on the other hand have been very poor of late. Export sales need to average 420 TMT/week to meet the latest USDA target for 2012/13. It's been 24 weeks since they've managed that (if we ignore the total of unshipped sales carried over from 2011/12 into the first week of the new marketing year).
My chums at MDA CropCast have cut their estimate for world wheat production this year by 1.8 MMT from last week due to acreage adjustments in Australia and FSU. Russia's wheat crop is now pegged at just 37.5 MMT versus 56.0 MMT last year.
French analysts Strategie Grains have cut their EU-27 grain production estimate by 1 MMT from last month to 269.5 MMT, mainly due to a corn crop reduced to 52.8 MMT, more than 20% down on last year's 66.4 MMT.
They also cut their EU-27 soft wheat crop estimate by 700 TMT to 123 MMT versus 128.7 MMT last year. Their UK wheat estimate was lowered 600 TMT to 13.46 MMT with yields at 6.75 MT/ha off 1.99 million ha.
The UK export stats are out for August and for wheat they don't look pretty. In fact they reduce MrsN#1 to a mere "four pinter" - just 26,804 MMT of the best wheat we could muster was shipped out during the month. That brings the 2012/13 marketing year-to-date total to a meagre 65 TMT, versus 282 TMT in the same period in 2011/12.
If we only manage to continue at this rate, and I could easily make you a case out that the monthly totals will in fact decline from here on in, then we would finish 2012/13 shipping just 390 TMT this season versus 2.5 MMT last year.
UK Jul/Aug wheat imports meanwhile were up 164% to 341 TMT vs 129 TMT in 2011/12.
Are you keeping an eye on my new weather maps from another chum at World Ag Weather on the right by the way? The 30 day precipitation map just keeps getting redder and redder, with not just the UK, but northern France, the low countries, Denmark and northern Italy also picking up plenty of moisture. Too much bloody moisture to be frank.
The long term forecast is for a colder and drier than normal winter (Dec/Feb) I understand, there's an interesting video on Dalmark's wonderful GrainPortal.com to that effect if you fancy a shuftie.
Chicago Rebounds On Bargain Hunting
17/10/12 -- Soycomplex: Nov 12 Soybeans closed at USD15.09 1/4, up 15 1/2 cents; Jan 13 Soybeans closed at USD15.08 1/4, up 15 1/2 cents; Dec 12 Soybean Meal closed at USD454.70, up USD1.90; Dec 12 Soybean Oil closed at 51.03, up 56 points. Beans managed to rally and hold above USD15/bu on bargain hunting and lack of farmer selling. Decent soaking rains finally appear to have arrived in Brazil. "The 2- 3 inch rains in Western Parana from yesterday’s showers put a dent in the drought, it is worth remembering though that October rainfall is normally 6-8 inches," said Martell Crop Projections. Soybean planting in Parana is estimated around 25% complete, around five points down on normal at this time. Likewise in Brazil's top producing state of Mato Grosso where around 18-20% of the crop has been sown. Trade estimates for tomorrow's weekly export sales for beans are 650,000-850,000 MT versus 523,700 MT last week. Commitments to date are now running at 70% of the USDA's recently upward revised target for the entire season. The trade will be looking to see how much, if any, of the recently rumoured Chinese business turns up in tomorrow's report.
Corn: Dec 12 Corn closed at USD7.45 1/2, up 7 1/4 cents; Mar 13 Corn closed at USD7.44 3/4, up 6 1/2 cents. Corn rallied as funds came in as net buyers of around 5,000 contacts on the day. Brazilian corn plantings are seen around 70% complete in the top state of Parana and 50% done in Rio Grande do Sul. Rains are hampering Argy corn sowings, which are seen around 27-28% complete vs 32-33% this time last year. Japan is expected to soon start booking corn for Q1 of 2013. They bought 250 TMT of Ukraine corn for Nov/Dec shipment yesterday, but it is thought that they may view Ukraine as a risky seller due to their inability to supply on time Jan/Feb this year due to freezing conditions at the ports. That may give US corn a competitive edge assuming that cheaper South American supplies will have dried up by then ahead of their 2013 harvest. Trade estimates for tomorrow's weekly export sales report are 150,000-300,000 MT. It will be interesting to see how accurate that proves to be after a run of disappointing results recently. Last week's sales were only 4,200 MT for 2012/13 shipment and 10 TMT for 2013/14.
Wheat: Dec 12 CBOT Wheat closed at USD8.56 1/4, up 8 1/2 cents; Dec 12 KCBT Wheat closed at USD8.94 3/4, up 12 cents; Dec 12 MGEX Wheat closed at USD9.40, up 15 1/2 cents. Algeria bought 400 TMT of optional origin wheat, thought by some to be Argentine origin and/or a mixture of Argy/European wheat. Certainly it is unlikely that US wheat will feature. The Algerian Ministry pegged their upcoming grain harvest at 5.1 MMT, up 20% on this year. Trade estimates for tomorrow's weekly export sales report are 250,000-400,000 MT versus a disappointing 279,877 MT last week. The trade is pinning it's hopes on an improved performance in the second half of the season. It is entirely possible that there is/has been more domestic feed use of wheat in the US than the USDA currently predict, meaning that they don't necessarily have to meet the USDA's full season export target of 31.5 MMT. US winter wheat is around three quarters planted, but dryness in the Great Plains remains a serious issue. Here, the cumulative rainfall back to June is only 63% of normal, say Martell Crop Projections.
EU Grains Close Mostly Lower
Fresh news was pretty limited. Algeria bought 400 TMT of milling wheat, thought to maybe of South American origin, for December delivery. Proof that maybe EU wheat isn't yet quite as competitive as it thought it was.
Open interest in Nov 12 London wheat continues to decline, to less than 1,400 lots today versus more than 10,000 a few months ago, making the market even thinner. May 13 London wheat is more or less running at parity with it's Paris counterpart.
The Ukraine grain harvest currently stands at 38.5 MMT off 89% of the expected area. The corn harvest is at 12.25 MMT off 65% to date, suggesting final output circa 19 MMT. That is some way below the USDA's current estimate of 21 MMT.
Winter wheat plantings in Ukraine are seen 94% complete, with crop conditions much better than a year ago.
The Australian Oilseeds Federation peg the rapeseed crop Down Under at 2.735 MMT, down 14% vs 3.185 MMT in 2011/12.
Egypt’s GASC said that it expects it's wheat imports to total 4.8 MMT in 2012/13, down 9% from 5.3 MMT a year ago.
Excessive rains place Argentina's wheat crop under threat from disease. They also mean that corn plantings are only around 27-28% done versus 32-33% a year ago.
Things are a bit better in Brazil where corn plantings in Parana state are 70% complete and have reached the halfway point in Rio Grande do Sul.
Ukraine Latest
The corn harvest is ongoing, disrupted by rain, at 65% complete producing 12.25 MMT so far. That suggests a final crop of around 19 MMT, which is 2 MMT below the current USDA estimate.
The sunflower harvest is also winding down at 95% complete producing a crop of 7.5 MMT to date.
Whilst rains may be hindering the harvest, they will help get what has already been sown get off to a much better start than a year ago when crops were planted ahead of winter dormancy under bone dry conditions.
The Ministry say that 89% of the planned area has been seeded to date, including 6.21 million hectares of winter wheat (94% of the expected) and 0.75 million hectares of winter barley (62% of plan).
That would suggest a winter wheat area of around 6.6 million hectares for the 2013 harvest, around the same as was sown last year, although heavy winter losses cut the harvested area by around a million hectares, according to the USDA.
Spring barley typically accounts for over 90% of the national barley crop, whereas spring wheat normally only accounts for around 5% of Ukraine's wheat output.
Chicago Manages Very Modest Rebound
16/10/12 -- Soycomplex: Nov 12 Soybeans closed at USD14.93 3/4, up 1 1/4 cents; Jan 13 Soybeans closed at USD14.92 3/4, up 1 cent; Dec 12 Soybean Meal closed at USD452.80, down USD3.30; Dec 12 Soybean Oil closed at 50.47, up 46 points. Funds were judged to have been even on beans on the day. As "Turnaround Tuesdays go, this was a modest affair. The soycomplex managed a very minor correction after two days of hefty losses, although beans tried to hold above USD15/bu in early gains they couldn't manage it. The USDA said 110,150 TMT of US soybeans were sold to "unknown" for 2012/13 shipment. CNGrain pegged the Chinese soybean crop down 10% at 13 MMT this year, whilst consumption is seen rising 5.8% to 70.55 MMT and imports up 12% to 59 MMT. CNGOIC estimate the Chinese soybean crop even lower at 12.8 MMT, down 12%, with rapeseed output also seen falling 9% to 12.2 MMT. Small-scale Chinese farmers are more comfortable sowing grains than they are oilseeds it would appear. There's 4-8 inches of rain in the forecast for southern Brazil across the next 15 days, according to World Ag Weather, which will be a boost for new crop soybean plantings. Reports continue to come in that US yields are better than expected for many farmers.
Corn: Dec 12 Corn closed at USD7.38 1/4, up 1 cent; Mar 13 Corn closed at USD7.38 1/4, up 1 cent. Funds were said to have been even on corn on the day. CNGOIC estimated the Chinese corn crop up 4% to 201 MMT. Forecast rains in Brazil will be of benefit to corn plantings although wet conditions in Argentina will put things back a little. Farmer selling is light as they busy themselves with harvest and aren't over keen on prices a dollar off the highs after the worst drought in 50 years. Last week's USDA's harvested acreage estimate may well prove to be too high is also the general feeling. So despite stagnant US corn exports, ending stocks will tighten as the season progresses. Whilst domestic demand from the US ethanol sector is also under pressure, another plant announced a temporary closure in the last few days, offtake isn't seen falling off a cliff. "Rains are expected to pick up again across central and eastern corn areas of South Africa this week, which should maintain sufficient moisture there for corn and germination and early growth. The rains will slow planting a bit, although no significant setbacks are anticipated," say MDA CropCast.
Wheat: Dec 12 CBOT Wheat closed at USD8.47 3/4, down 1/2 cent; Dec 12 KCBT Wheat closed at USD8.82 3/4, up 1 1/2 cents; Dec 12 MGEX Wheat closed at USD9.24 1/2, up 3 1/2 cents. Funds were said to have been modest net sellers of around 1,000 Chicago wheat contracts on the day. CNGOIC pegged the Chinese wheat crop up 0.5% at 118 MMT. China bought 295,000 MT of Canadian spring wheat. Concerns remain for US winter wheat going into dry ground. Rainfall last week increased in the US bread-wheat states averaging 0.55 inch and above normal, although soil moisture is still inadequate reflecting severe summer drought. The cumulative rainfall back to June is only 63% of normal, say Martell Crop Projections. Argentine wheat areas remain too wet, Western Australia remains too dry. "Earlier rains improved moisture considerably across Morocco, and rains last week improved moisture in eastern Algeria and northern Tunisia. Rains are expected to return to western Morocco and northwestern Algeria this week, which should further improve moisture there as well. This will favour wheat germination as planting begins over the next few weeks," say MDA CropCast.
EU Grains Post Modest Gains Following US Lead
US grains attempted to stage a mini "Turnaround Tuesday" in early trade and European markets followed suit. However, by the close of play America had slipped back into slightly negative territory, at least for corn and wheat, taking the shine off things in Europe too.
The EU trade seems to be in a state of limbo. London wheat hasn't closed outside the GBP197-207/tonne range in two months, whilst Paris wheat has been stuck in the EUR256-268/tonne range for the same period.
The general consensus seems to be that the Black Sea is more or less out of the market now, at least for wheat, and that EU exports will soon start to pick up. Lower EU-27 production this year will see ending stocks tightening as we get into the second half of the season.
Argentina's wheat crop will be wanted by Brazil. Australia's wheat crop will fall short of the 23 MMT that the USDA cut to last week, and will be closer to the 20 MMT mark. Those left holding wheat in Q3 and Q4 of 2012/13 will be strong sellers and buyers will simply have to pay up. That is the gist of the common theory doing the rounds at least.
Concerns are also being raised that the current wet conditions, not just in the UK but also in northern France, are hampering winter grain sowings.
Eurozone jitters and fund selling in the US have been hampering any attempts at gains though.
When is a bailout not a bailout? Spain are said to be close to asking the ECB for a "credit line" so that it can begin buying Spanish debt. The move, which some think they may seek approval for at this week's Euro-zone Summit beginning Thursday, appears to be a way of avoiding the same degree of humiliating compliance dished out to Greece.
The market being the market, in it's typical short-sighted way, seems to think that extending Spain some more rope with which to hang itself is a good thing. Live for today, hope for tomorrow. The Euro was higher across the board on the rumour.
Following this year's disastrous harvest, various private forecasts see the UK importing anywhere between 1.5-2.5 MMT of wheat in 2012/13, an increase of 66-177% on last season. Exports meanwhile are expected to more than halve to 1 MMT at best.
Ukraine reported Oct 1 grain stocks at 19.4 MMT, 11% down on year ago levels. That included 10.5 MMT of wheat, 2.9 MMT of barley and 4.3 MMT of corn. The corn harvest there is around two thirds complete, delayed by recent rains, although these will be beneficial for winter grain development pre-dormancy.
An Ag Ministry official said that 90% of winter grains are in healthy condition, and that 9.1 million hectares will be sown with winter crops this year, a slight drop on 9.4 million last year, although the winter wheat area will be increased by around 100,000 ha.
Ukraine's grain exports are 73% up on this time a year ago at 6.64 MMT, although it is worth noting that export restrictions in Q1 of 2011/12 hampered the early part of that particular campaign. Of that total 3.35 MMT is wheat, 1.85 MMT corn and 1.34 MMT barley.
The Ministry said that 11 MMT of grains have already been contracted for export this season, including over 5 MMT of wheat, which is supposed to be the ceiling that has already been agreed with local trading houses. The bulk of export sales for the remainder of 2012/13 will therefore likely be corn. Japan bought 250 TMT of Ukraine corn overnight.
Romania's corn crop is forecast 42% lower this year to 6.1 MMT by the USDA's Bucharest attaché on persistent summer dryness.
The early Canadian harvest this year may see increased winter wheat plantings for the 2013 harvest, possibly to record levels, according to some reports. These would usually be completed by the end of October.
Brazil Turning Wet
There's 4-8 inches of rain in the forecast for southern Brazil across the next 15 days - good news especially for Parana, they say.
I once asked MrsN#1 if I could do a 'Brazilian' on her. When she said, "Yes" I threw her to the floor and shot her in the head three times.
We used to have a Brazilian housekeeper you know. She was rubbish at making the beds but was very tidy downstairs though.
In other soybean news the USDA have this afternoon confirmed the sale of 110,150 MT of US soybeans to unknown for 2012/13 shipment. Hardly a landslide of sales to China that the market has been persistently rumouring. At least not so far anyway.
CNGrain report that this year's Chinese soybean crop will fall 10% on last year to 13 MMT, whilst 2012/13 consumption will rise 6% to 70.55 MMT. Imports are forecast up 12% to 59 MMT.
CNOIGC meanwhile see soybean output a little lower at 12.8 MMT, a fall of 12% on last year. Rapeseed production is also forecast in decline at 12.2 MMT, down 9%. Plantings for both were down this year as farmers increased sowings for corn and rice.
The Chinese think tank in contrast have increased their forecast for corn production to a record 201 MMT this year (+4% on 2011), with wheat production at 118 MMT (+0.5%).
There was Chinese bloke tee-ing off at the first when I spoke down at the Bristol Corn Trade Golf thing the other week. He hit a great first shot that landed about two feet from the pin. I said "great tee shot". He said "thank's very much, but it's a rickle bit tight round the neck."
The Morning Vibe
16/10/12 -- The overnight grains are firmer in Turnaround Tuesday style, with nearby Nov 12 beans back up above USD15/bu, although only just at USD15.03 for a 10 1/2 cent gain. Corn is up 4-5 cents and wheat up 3-6 cents.
The market seems a little bemused that prices have capitulated to the recent extent. Front month beans are down almost 16% from the early September highs, with corn down more than 11% since mid-August and wheat down 10% from the mid-July highs.
That's the power of fund selling I guess, pitted against what most in the trade view as strongly underlying bullish fundamentals.
So what's eating the funds at the moment? Well, there's Europe for a kick off. They may have won the Nobel Peace Prize, but they couldn't organise a piss up in a brewery when it comes to fiscal management.
The Spanish government are preparing a bailout request, according to the FT. Greece may or may not get it's next tranche of bailout money, it doesn't appear to want to jump through any more hoops though, and if it doesn't there will be brown smelly stuff all over Europe. Meanwhile, Portugal has just unveiled another wave of austerity measures that have proven to be about as popular as piles. Then there's Ireland, and Italy, and Merkel playing hardball...all the same old stuff really.
From the fundamental viewpoint we also have record wall-to-wall South American soybean plantings and potential production, if the weather co-operates. In addition US corn sales have been limping along for a few months now. Last week's sales of 14,000 MT were extremely poor once again, the previous week's fairly modest sales of 326,900 MT were in fact the highest in 20 weeks.
News broke yesterday that the Bunge-Ergon ethanol plant in Vicksburg, Mississippi will suspend operations next month due to poor margins. This is not the first recent ethanol plant closure.
Japan have just announced the purchase of 250 TMT of Ukraine corn overnight. The USDA's estimate that the latter will harvest 21 MMT of corn this year is probably too high, with 19 MMT probably nearer the mark, even so they will remain an aggressive exporter in 2012/13.
The Kazakh Ministry say that they will have a 14 MMT in bunker weight, 12 MMT in clean weight, grain harvest this year. Bunker weight output in 2011 was nearly 29.7 MMT. Even so "we will maintain last year's growth of exports," says the Kazakh PM.
That may be a tall order, although last year's exports were suppressed due to difficulties gaining access to the Black Sea ports due to Russia and Ukraine's own export ambitions.
Chicago Closing Comments
15/10/12 -- Soycomplex: Nov 12 Soybeans closed at USD14.92 1/2, down 30 cents; Jan 13 Soybeans closed at USD14.91 3/4, down 30 1/4 cents; Dec 12 Soybean Meal closed at USD456.10, down USD9.10; Dec 12 Soybean Oil closed at 50.01, down 56 points. Soybeans closed below USD15/bu for the first time since the first week of July. Fund selling was estimated at 10,000 soybean contracts on the day. Friday's Commitment of Traders report shows that their recent liquidation phase, which has seen soybean prices tumble more than USD2.50/bushel, places them with their smallest long in over 6 months. China's CNGOIC said that October soybean imports would be higher than originally forecast at 4.25 MMT and that Nov/Dec shipments would also increase on original estimates due to the recent price drop. In the calendar year 2012 China will import a record 57 MMT of soybeans, they said. Malaysia said it was to cut the export tax on crude palm oil as domestic stocks hit a record high, and with prices recently falling to a more than 2 year low. After the close the USDA placed this year's US soybean harvest at 71% complete versus 58% last week and 64% a year ago.
Corn: Dec 12 Corn closed at USD7.37 1/4, down 15 1/2 cents; Mar 13 Corn also closed at USD7.37 1/4, down 15 1/2 cents. Fund selling was estimated at 12,000 contracts on the day. Friday's COT report shows funds cutting their net long position to the smallest in 2 months as of last Tuesday night. Demand for US corn, or the lack of it, has got them spooked drought or not. Friday's combined weekly export sales total of just 14 TMT for both 2012/13 and 2013/14 shipment compares very poorly with the 1.3 MMT sold in the same week a year ago. Reuters say that feeders in the SE have recently signed a deal to import 600 TMT of Argentine corn, hot on the heels of a similar deal to import 750 TMT of Brazilian corn announced recently. The USDA said last week that the US would import 1.9 MMT of corn in 2012/13 - the highest total in many years. Some private analysts think that 3 MMT may be nearer the mark. Exports meanwhile will tumble to 31 MMT, they said - the lowest since 1991/92. Weekly export inspections of 17.235 million bushels were below expectations and the 23.5 million needed to reach this target. After the close the USDA pegged the US corn harvest at 79% complete versus 38% on average and 42% a year ago.
Wheat: Dec 12 CBOT Wheat closed at USD8.48 1/4, down 8 1/2 cents; Dec 12 KCBT Wheat closed at USD8.81 1/4, down 9 cents; Dec 12 MGEX Wheat closed at USD9.21, down 3 1/4 cents. Fund selling on Chicago wheat was estimated at 2,000 contracts on the day. Weekly export inspections for wheat were poor at just 7 million bushels versus 13.2 million last week and 16.6 million in the same week of 2011. US winter wheat plantings have reached 71 % complete, according to the USDA, That's bang in line with the five year average. Emergence improved form 23% last week to 36% this week, although that still lags the five year average of 44%. Wheat prospects are looking up in southern growing areas of New South Wales, Victoria and South Australia, according to Martell Crop Projections. October rains were 1-1.5 inch in key wheat areas Eastern Australia and favourable for flowering and heading wheat. Although at the same time October growing conditions deteriorated in Western Australia with hotter and drier weather," they add. Elsewhere: "Welcome cooling has finally developed in Russia’s southern winter wheat zone, but drought continues to be a very issue. Winter wheat has been slow to emerge in the Southern District. This is the top winter-wheat growing area that accounts for 42% of Russia wheat production," they say.
EU Wheat Mixed To Start The Week
EU wheat followed US markets lower in the morning, despite some bullish fundamentals. Defra for once concurred pretty closely with last week's forecasts from the NFU pegging the UK wheat crop 13% down at 13.3 MMT, with yields averaging only 6.7 MT/ha - a 14% decrease on last season.
The UK OSR crop was forecast 7% below last season's record at 2.6 MMT, with yields averaging 3.4 MT/ha. Both these numbers were a little below the NFU's estimates of 2.76 MMT and 3.6 MT/ha.
Defra placed the UK barley crop 0.6% higher than in 2011 at 5.5 MMT with yields at 5.5 MT/ha.
"Wheat production was the hardest hit...yields have been affected by the poor weather this year which led to high levels of disease during spring and summer along with low sunlight levels during the grainfill period," they said.
Defra's estimate is 0.7 MMT below last week's USDA forecast, which also trimmed 0.5 MMT off French production this year to 38.5 MMT and placed full EU-27 output at 131.58 MMT, which is 5.7 MMT down on last year.
On the weather front: "Rains increased across northwestern and southeastern Europe over the weekend, improving conditions for winter crop germination and establishment. Rains in UK will maintain some wetness concerns, however. The rains may also lead to some wetness in northwestern France," say MDA CropCast.
In France the corn harvest is only 16% complete versus 55% this time last year, as the wet weather disrupts harvesting. Winter plantings are also lagging at 14% complete versus 29% a year ago.
Ukraine's grain harvest is 87% complete at 37.6 MMT. The corn harvest is 62% through producing a crop of 11.4 MMT to date.
CONAB estimate the Brazilian wheat crop at 5.0 MMT this year, in line with the latest USDA forecast and 13-14% down on last year. The top two wheat states in Brazil are Parana, where harvesting is already 60% complete, and Rio Grande do Sul where it is just getting underway. Plantings in the former were down 27% this year due to second crop corn offering potentially more lucrative returns. Brazil has a domestic consumption of around 11 MMT of wheat per annum and will probably import around 7 MMT in 2012/13.
Goldman Sachs are apparently forecasting Chicago wheat prices to reach USD10.25/bushel by the end of the year, around 20% higher than were prices currently stand. The USDA have over estimated production in the southern hemisphere this year they say, placing the Australian wheat crop at 21 MMT (versus 23 MMT from the USDA) and the Argentine crop at 10.8 MMT (versus 11.5 MMT).
Whilst Black Sea wheat has dominated most of the first half of the 2012/13 export season, EU wheat should come into its own in the second half of the marketing year, having a distinct geographical advantage into the North African and Middle East markets.
Much of Argentina's exportable surplus will probably end up in Brazil, with Australia and Canada competing with the US into Asia. Dark horse India may continue to ensure that these traditional wheat exporting nations don't have things all their own way however.
The Morning Vibe
15/10/12 -- The overnight electronic market is sharply lower as Friday's capitulation continues. Beans are currently around 30-35 cents lower, with corn down 10-12 cents and wheat 6-7 cents easier.
Funds were estimated to have been net sellers of around 15,000 corn contracts, 10,000 soybean contracts and 4,000 wheat contracts on Friday. Further liquidation looks likely to be on the cards this afternoon.
As ever, when they are in this sort of mood, the rest of the market can't easily absorb the weight of selling (or buying). Add in a bit of throwing in of the towel from the weaker longs and it all looks rather messy.
China must be loving it, that's all I can say, as they were perfectly content buying beans at USD17.50/bu and now find themselves able to buy sub-USD15.00/bu. Does that mean we will soon start to hear stories of Chinese cancellations, who knows?
Fund money holds the key to where we go from here. Reuters are reporting that one un-named London-based hedge fund is "reducing its exposure in grain markets in favour of other assets."
Back to the fundamentals, Brazil got some rain over the weekend, and things there are finally starting to look up. "Showers will expand across northwestern and southern areas this week, favouring western Rio Grande do Sul, Mato Grosso, southern Parana, Goias, northern Sao Paulo, western Mato Grosso do Sul, and Santa Catarina. Amounts through Friday will be 0.50 to 1.5”, locally 3”, with 70% coverage," say MDA CropCast.
"Widespread showers this week will improve conditions for soybean and corn germination. The 6-10 day outlook is wetter in central and southern areas with above normal rainfall expected," they add.
In the US it's a bit of a two-edged sword: "Drier weather across the southern Midwest will aid corn and soybean harvesting, while harvesting will slow a bit across northern areas. Rain-free weather in the central Plains will allow dryness to persist in western NE, extreme northwest KS, and northwest CO," they say. The latter won't help winter wheat planting/germination of course.
The USDA will report on crop progress this evening, with corn harvesting expected to be around 75-80% complete, up from 69% last week, with beans around 70% done compared with 58% a week ago.
Defra say that the UK wheat crop this year will only amount to 13.3 MMT, with yields averaging 6.7 MT/ha, very similar numbers to those from the NFU last week. The OSR harvest will be 2.6 MMT and this year's barley crop 5.5 MMT, they add.
Agritel say that the recent wet weather in France has stalled the corn harvest, which currently stands at only 16% complete versus 55% done this time a year ago. Winter grain plantings are also slow off the mark at 14% done versus 29% last year, they add.
This year's Czech grain harvest is seen 20% down on last year at 5.8 MMT, according to the local Stats Office.
Chicago Closing Comments - Friday
12/10/12 -- Soycomplex: Nov 12 Soybeans closed at USD15.22 1/2, down 26 cents; Jan 13 Soybeans closed at USD15.22, down 26 1/2 cents; Oct 12 Soybean Meal closed at USD474.30, down USD8.40; Oct 12 Soybean Oil closed at 49.89, down 99 points. For the week Nov 12 beans fell 28 1/2 cents, Oct 12 meal dropped 40 cents and Oct 12 oil lost 87 points. Weekly export sales for beans of 500,700 MT for 2012/13 and 23 TMT for 2013/14 fell below the expected 700-900 TMT. Actual shipments of 1.179 MMT though were the highest in the last 8 years for this week of the season. Safras e Mercados said that 9% of the Brazilian soybean crop has been planted versus 13% a year ago and 5% on average. Early planting there has been delayed as farmers wait for decent rains. These are finally expected to become widespread across central and northwestern Brazil this weekend and especially next week, significantly improving conditions for corn and soybean germination and early growth, say MDA CropCast.
Corn: Dec 12 Corn closed at USD7.52 3/4, down 20 1/2 cents; Mar 13 Corn closed at USD7.52 3/4, down 20 1/2 cents. For the week Dec 12 corn was 4 3/4 cents higher and Mar 13 4 1/4 cents firmer. Weekly export sales of a paltry 4,200 MT for 2012/13 shipment and 10 TMT for 2013/14 fell well short of the expected 300-425 TMT. Year to date sales commitments now total 410.7 million bushels, little more than half the 723.1 million at this time last year. Export sales need to average 420 TMT/week to meet the latest USDA target for 2012/13. South Korea cancelled a tender for 210 TMT of optional origin corn for March/April shipment due to high prices. Corn demand clearly is being rationed it would seem, at least in the case of US corn. With Brazilian corn already lined up to be shipped into US feed houses there was some talk today of Argentine corn also being lined up to be imported into the US.
Wheat: Dec 12 CBOT Wheat closed at USD8.56 3/4, down 29 1/4 cents; Dec 12 KCBT Wheat closed at USD8.90 1/4, down 27 3/4 cents; Dec 12 MGEX Wheat closed at USD9.24 1/4, down 22 1/2 cents. For the week CBOT wheat was 3/4 of a cent easier, with Kansas wheat up 11 1/2 cents and Minneapolis rising 4 3/4 cents. Weekly export sales of 279,877 MT also fell short of the expected 300-500 TMT. As well as cancelling a corn tender South Korea also called off one for 70 TMT of optional origin wheat for Jan shipment due to high prices. MDA CropCast said that "the US precipitation outlook has trended wetter cross the central Plains into the west central Midwest. The upturn in rains will further improve moisture supplies for winter wheat as the crop pushes into dormancy." Russia's Ag Ministry said that the grain harvest is over producing 71.7 MMT, 24% down on last season.
EU Wheat Close - Friday
On the week overall that put Nov 12 London wheat GBP0.60/tonne higher and Nov 12 Paris wheat EUR0.25/tonne lower.
It seems that the "mixed bag" nature of yesterday's USDA report hit home today as London wheat gave up most of Thursday's gains on the day, with Paris wheat wiping them all out and then some.
Adding fuel to the fire was another round of dire weekly export sales for US corn from the USDA. Weekly corn sales of only 4,200 MT for this marketing year and 10 TMT for 2013/14 fell well short of the expected 300-425 TMT.
Last week's fairly modest sales of 326,900 MT were in fact the highest in 20 weeks, indicating that global demand for US corn has taken a severe knock at current levels.
US wheat export sales this week were also below expectations at 279,900 MT, falling below Europe's weekly export licence total of 376,000 MT. The latter brings the 2012/13 marketing year to date total for soft wheat exports to 4.2 MMT, some 16% down on this time a year ago, yet the USDA have Europe down to export the same volume in 2012/13 as last season.
Russia Ag Ministry said Russia’s grain harvest is now complete, estimating the final haul at 71.7 MMT versus their previous estimate of 71.0 MMT and compared to 94.2 MMT in 2011.
US and EU wheat exports are expected to pick up, with Russia seemingly more or less sold out now until the start of 2013/14.
